Bond market buoyed by falling oil price

KUALA LUMPUR: Falling oil prices have created favourable conditions for the bond market said RHB Asset Management Sdn Bhd (RHBAM) chief investment officer Hoe Cheah How with the bond market expected to be volatile in 2015 due to weak economic data releases.
With oil price at an estimated average of US$60 to US$70 (RM209.4 to RM244.3) per barrel next year, he said economic numbers from China, the Eurozone and Japan will continue to be volatile and contribute to market jitters and cautiousness.
"Declining oil prices is good for the consumers and from an inflationary perspective, we view that as positive. The bond market dislikes inflation so a declining inflation environment is supportive of the bond market in general," he told a press conference after the launch of the RHB-OSK Focus Income Bond Fund Series 4 yesterday.
"Lower inflation will not push central banks to raise interest rates and we continue to believe the overnight policy rate will stay unchanged at 3.25% for next year, due to the removal of fuel subsidies, introduction of the GST (goods and services tax) as well as slower growth," added Hoe.
RHBAM managing director and regional head of group asset management Eliza Ong expects its asset under management (AUM) to grow to between RM56 billion and RM58 billion next year, with no less than 20 fund launches across the region. Its AUM is now at RM49 billion, just RM1 billion shy of its RM50 billion target by year-end.
Ong was speaking at launch of the RHB-OSK Focus Income Bond Fund Series 4, a three-year close-ended bond that aims to maximise returns at the fund's maturity date from a concentrated portfolio of global debt instruments.
RHBAM structured the fund to retain the investment strategy similar to the previous RHB-OSK Focus Income Bond Fund series, and the re-introduction of the fourth series is due to strong investors' demand.
The fund offers investors' a potential annual income distribution of around 4.5% to 5% per year.
The investment strategy of the fund consists of a portfolio of not more than 20 global debt instruments such as bonds, commercial papers, bankers' acceptances and notes with attractive yields and capital appreciation during the tenure of the fund. These are debt instruments issued by corporations, financial institutions, supra-nationals, governments and their agencies globally.
Launched on Dec 3, 2014, the RHB-OSK Focus Income Bond Fund Series 4 will invest between 90% to 100% of its net asset value (NAV) in global debt instruments, of which a minimum 70% of the NAV will be invested in bonds and at least 10% in liquid assets including money market instruments and deposits.
RHBAM hopes to raise RM120 million from the fund by the end of the offer period.